Looking Backwards

Edward Bellamy looked backwards for a period of over a century. Less dramatically over the past weekend, the state controller, Betty Yee, provided a look backwards over fiscal year 2020-21, the year that ended June 30th. On the tenth of each month, the controller provides a cash statement related to the state's general fund. So we now have a complete record of what actually occurred during the last pandemic-engulfed fiscal year.

It might be noted, by the way, that the state's Dept. of Finance has not produced official figures for either the past fiscal year or the current one. Surprisingly, that lack of information is due to the fact that the budget for the current year which began July 1 still isn't quite cooked.

Those who can remember back to the Schwarzenegger era and before will know that when budgets weren't finished on time, an unfolding crisis began to occur. Suppliers to the state weren't paid. Courts got involved. But then the voters approved Prop 25 which required the legislature to approve a budget on time or lose a day's pay for each overdue day. More importantly at the time when Republicans still controlled at least a third of the seats in one or both houses, Prop 25 changed the required vote for a budget from two thirds to a simple majority, allowing the Democrats to approve budgets without dealing with the Republican minority. On-time budgets resulted.

But - after some litigation - courts ruled that it was up to the legislature to determine what a "budget" was. So the majority could pass something called a budget and meet the standard. What has emerged was a practice of passing something by the mid-June deadline and then continuing to negotiate with the governor. This time it seems, the negotiations have continued but enough of a budget was passed to keep the state in business, paying its suppliers, etc. For more on this process, see:

https://www.sacbee.com/news/politics-government/capitol-alert/article252689888.html

Now, let's look at the controller's data.  

The chart above shows cash receipts of the general fund, both forecast and actual. The lowest dashed line is what happened in the previous year, 2019-20. Actual cash on hand for 2020-21 started out ahead of the previous year, in part because income taxes normally due in April 2020 were deferred to July. So the 2020-21 year started with that extra deferred cash. But as the second-highest dashed line shows, the projections for 2020-21 at that time were gloomy, exceeding the previous year because of the deferred income taxes. By January 2021, it had become apparent that more cash was coming in, especially from the income tax, than anticipated - as shown by the dotted line. And, as it turned out, the actual result for 2020-21 (continuous line) exceeded both the June 2020 and the more optimistic January 2021 forecast.

Disbursements (spending) during 2020-21 were (was) unaffected by the income tax deferral. So the actual result starting out in 2020-21 was not all that different from the previous year (2019-20). The forecast made in June 2020 assumed various cuts below the previous year. But they didn't happen in the end to the extent anticipated. By January 2021, a more realistic projection was made. But, in the end, that projection exceeded the actual result, probably because despite new programs being created, the state just couldn't dump the money out the door fast enough.

How much cash did the state have on hand in case of emergencies? Note that cash on hand includes not just official reserves connected to the general fund but also monies sitting in myriad earmarked funds outside the general fund that the state can borrow from if needed, so-called "unused borrowable resources" shown on the chart below:

What the chart shows is that we closed fiscal year 2020-21 with substantially more cash in hand than we had a year before or that we were forecast to have, either in June 2020 or January 2021. Some of this extra cash is a reflection of the above-mentioned limited ability of the state to dump cash out the door quickly. State government is better at creating policy ideas than at actually implementing them.

Monthly data from the controller are available at https://sco.ca.gov/ard_state_cash_fy2021.html.